State Intervention in the Development of Digital India

Bar & Bench January 7 2019
Sidharth Chopra and Nandita Saikia, public interest

Sidharth Chopra and Nandita Saikia

There has never been a time when technological change has not been accompanied by resistance to it. Change, whether one thinks that it is progress or not, has the tendency to disturb the status quo, and to leave those who most benefited from the status quo disgruntled. And so it has been with regard to the emergence of Digital India.

In recent times, there has been a flurry of activity attempting to regulate communications online and transactions which relate to the provision of services, and the availability of tangible and intangible property via the Internet. Various voices have vociferously demanded that the medium be regulated before it does any more harm than it has purportedly already done to our social values and social fabric.

Considering that we live in the age of fast-proliferating fake news with the potential to give rise to lethal consequences, if not anything else, it would be irresponsible to simply brush aside all concerns relating to the Internet, and to new ways of communicating and transacting business.

That said, the answer to technological advancements does not lie in resistance but in accepting and adapting to such changes. It is, however, not clear at all whether Indian legal policy is adapting to changing times and technologies or if it is attempting, possibly subconsciously, to reinstate the pre-Internet era.

eCommerce Policy Developments

In the realm of eCommerce, the Department of Industrial Policy and Promotion recently claimed to clarify the Consolidated FDI Policy Circular of 2017 through a press note which, in effect, changed the substance of the law relating to online marketplaces. These marketplaces, in essence, tend to be websites through which numerous sellers can make their products available for sale.

Needless to say, online marketplaces, although they have been in existence for some years now, are not cherished by traditional offline retailers and middlemen. The latter have, in all the centuries before the eCommerce arose, controlled the distribution network to sell products and, along with retailers, almost exclusively determined the availability of products accessible by members of the general public. Naturally, eCommerce which operates without the aid of traditional retailers and their middlemen throws a spanner in their works, and has the potential to make them redundant.

In its latest press note, the Department has said that 100% FDI is allowed in the marketplace model of eCommerce with some caveats. A company which engages in the bulk purchase and sale of goods and which belongs to the same group as the eCommerce marketplace owner would not be allowed to sell its products through that particular online marketplace. Additionally, an online marketplace cannot have any exclusive arrangement with brand owners to exclusively introduce and sell their products through the marketplace.

The potential of the Internet to cut out traditional middlemen and ensure delivery of top brands to every nook and corner of India needs no elaboration. The fact that those engaged in offline sales are rattled is sufficient evidence of the efficiency of online marketplaces.

There are legitimate arguments to be made about the need to protect local traders, the need to avoid effective monopsonies and monopolies which large eCommerce companies could engender, and to protect small manufacturers of niche, possibly handmade, goods. Unfortunately, the press note lacks the nuance with which to effectively do this and appears merely to address the fear of being hampered by technology held by traditional retailers and middlemen.

Whether those fears deserve to be comprehensively and uncritically addressed is questionable although it is worth noting that hoping any government would not stick with its traditional constituency six months before a General Election may be hoping against hope.

New technology, almost by definition, disrupts the old ways whenever it comes into contact with them, and experimenting with the new-fangled, let alone giving it primacy, requires a comfort zone which a government in an election year does not have.

The government's clarification of what the policy supposedly always intended will become operative from February 2019. A retrospective clarification which will become operational prospectively! This would, of course, make for a rather unusual legal position.

Unless there is a significant change in the course the government is taking, once implemented, it is likely that the clarification will throw eCommerce off gear without guaranteeing that offline retail will be able to fill the vacuum.

Content Regulation Proposals

It is not just in relation to the sale of products online that government policy has been accidentally veering towards the resurrection of a pre-Internet world.

There has also been considerable debate on regulating the content made available for viewing on the Internet. Yet again, our ‘social values’ is the red herring sought to be raised. It is argued that an unregulated internet would have a negative impact on our society and, often, that intermediaries and OTT platforms should play a proactive role in screening content for illegality.

The argument is, of course, flawed on several counts. Firstly, most of the content laws which apply offline also apply online. Secondly, there are a number of laws also specifically geared to regulating online content. And, thirdly, given the sheer volume of content available online, it is simply not possible for any person or, for that matter, any artificial intelligence mechanism to screen it even if the latter were smart enough to do so. It isn't.

The argument therefore simply doesn't support the need for further regulatory intervention, and it raises the suspicion that the demand to regulate Internet primarily arises on account of the fear that an interconnected computer network would facilitate the free exchange of ideas with discussions empowering users far beyond what they had been in times when communication was far more difficult, and starving people of both information and the ability to organise themselves required no more than blocking a road or cutting a telegraph wire.

Controlling people or ideas or goods is no longer as easy as it once was. That does not mean that control is not required: we know all too well that people can organise themselves into a lynch mob using modern technology just as easily as they can organise themselves into a friendly neighbourhood yoga club. Technology tends to be agnostic to the motivations of its users, and once it is publicly available, to try to suppress its use is a fool’s errand.

Looking Ahead

We have old laws which apply to new technologies. We have new laws which specifically deal with new technologies. We also have, embarrassingly enough, difficulty implementing any law.

What we need is a comprehensive policy framework which appreciates that the world is changing and that although disruption is not necessarily problematic, problems can arise. So, a policy must be nuanced enough to both address problems and ensure that the law does not stand in the way of progress, and enforcement mechanisms must be robust enough to actually implement the laws through which policy is expressed.

Governments must understand the nature of technology. Technology is disruptive. It would always disrupt the existing ways of doing business and of our interacting with each other, sometimes doing both at the same time. The prudent response to this disruption lies not in (over)regulation or resistance to technology but in adapting to change.

Anthony Falzone once explained how a US court recognised that 'search engine technology provides an astoundingly valuable public benefit which should not be jeopardized just because it might be used in a way that could affect somebody’s sales'. The case in question was Google v. Perfect 10, where Google's displaying thumbnails of images in search results was challenged.

The imminent choice our country is facing is to decide whether we want an open and inclusive Internet or an Internet regulated in ways that content has, through history, been regulated offline. These old ways potentially limit products, speech, and, indeed, ideas available to the public to those which the government of the day approves and which are peddled to citizens in a government-approved manner.

This is not a question of one's political affiliations but a question of what one wants the structure of the state to look like. The modern nation-state has, since its inception, been geared to control flows of people, ideas, goods, and capital. Technology challenges state control. Nonetheless, if the aim is to facilitate the emergence of Digital India, we would do well to focus on arresting the potential problems technology creates without erecting regulatory barriers which would hamper the development of technology and the progress attendant to it. At the moment, we appear to have little idea of how to achieve this not least because this is not a conversation we have had at any length worth mentioning.

The authors, Sidharth Chopra and Nandita Saikia, are lawyers who have advised a number of companies in the eCommerce and media realm on issues of law and legal policy. The views expressed in this article are their own personal opinion.